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Return on Digital Technologies: Insights for OFES Companies

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Getting a return on digital technology investments: Insights for oil field and equipment and services (OFES) companies

Digital technologies can have a disruptive impact on the landscape of how work is done in the oil field, with the potential to redraw the value chain, deliver a step change in productivity and create new channels to market, but services and machine and equipment manufacturing companies need robust strategies to succeed.

Companies can become enamored with technological advancements, failing to consider how best to apply them toward business goals—at times spending on ventures and business models that do not deliver.

Leaders understand where and how disruptions will impact them—accurately assessing maturity and gaps in the existing digital culture—and determine which solutions are appropriate to further the overall digital vision while delivering the highest return on investment.

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Return on Digital Technologies: Insights for OFES Companies

  1. 1. DIGITAL TECHNOLOGIES Insights for oilfield and equipment and services (OFES) companies GETTING A RETURN ON
  2. 2. THE NEW OIL AND GAS MARKET REALITY Copyright © 2018 Accenture. All rights reserved. 2 • After 10 years of sustained high commodity prices, range-bound commodity prices have pushed OFES companies to rethink their cost structures and business models. • The price of data generation, storage, and analysis has dropped to an all-time low. • An enormous amount of data is generated—but only a small fraction of companies use it to develop new offerings and improve operations. UPSTREAM IS NO LONGER ABOUT EXPLORATION Exploration & Property Acquisitions Development Source: Rystad Energy, Accenture analysis More than 75% of all upstream capital is now spent on development versus 75% on exploration and land purchases in 2000 2000 2010 2016 25% 35% >75%
  3. 3. CHALLENGES OFES COMPANIES ARE FACING Copyright © 2018 Accenture. All rights reserved. The industry is hampered by: 3 Asset availability and utilization is inefficient, leading to significant capital being tied up in assets and a low return on the capital employed. This is compounded by poor practices and stunted capabilities: A lack of real-time visibility into asset location/health. • Silo’ed, disparate data. • Slow, intuition-based decisions. • Bespoke, customized design and a static development cycle. No single, analytics-driven platform or approach. A reactive maintenance and repair strategy. Inefficient resource planning. Ineffective maintenance performance management and controls. Poor network optimization. • Isolated teams. • Reactive intervention. • Isolated and disconnected materials, logistics and workforce.
  4. 4. Where will digital technologies have the largest impact in helping OFES companies address these challenges? Copyright © 2018 Accenture. All rights reserved. Digital technologies can create significant value for OFES companies in 4 key areas: 4 1 2 3 4 Tracking asset utilization and performance Optimizing business-to-business (B2B) sales processes Redesigning the supply chain to lower costs for product development and consumables Shifting the back-office cost structure and making it more flexible
  5. 5. TRACKING ASSET UTILIZATION AND PERFORMANCE Copyright © 2018 Accenture. All rights reserved. • In 2005, the major services companies had an asset to revenue ratio of approximately 1-to-1 (i.e. for every dollar spent, the company earned one dollar). In 2017, this ratio had collapsed to under 1-to-0.4 (only $0.40 in revenue per dollar invested)*. • OFES companies have become asset companies without realizing it—but their internal management processes are still largely focused on personnel management not asset management. • Most collect significant amounts of data on their assets, but rarely do they harness the power of this data. • Digital technologies can connect data with decision makers or enterprise systems in real-time—helping improve condition-based maintenance scheduling and capital planning. • Predictive analytics can be used to improve asset uptime and performance. 5 AREA 1 REVENUE / ASSETS
  6. 6. OPTIMIZING BUSINESS-TO-BUSINESS (B2B) SALES PROCESSES Copyright © 2018 Accenture. All rights reserved. 6 AREA 2 • The OFES environment remains one of the most complex sectors for B2B sales—with a variety of offerings (including products, services and software) and customer types (such as SMs, NOCs and small independents) each with different buying and delivery requirements around the world. • This complexity results in an enormous amount of data being generated in the ecosystem, most of which is discarded. Collecting and interpreting this data could reveal ways to improve forecasting accuracy and pricing, as well as shifting resources to higher margin areas. • Digital technologies can be used to analyze individual transactions and generate new offerings for customers. The biggest opportunity (an average return on sales of 2-4%) lies in data-led decision making including: • Advanced-analytics-enabled pricing systems. • Growth opportunity identification. • Combining digital channels with process digitization can improve the customer experience while lowering cost-to-serve. • Churn prediction algorithms at the individual-customer level. • Sales countermeasure identification.
  7. 7. REDESIGNING THE SUPPLY CHAIN TO LOWER COSTS FOR PRODUCT DEVELOPMENT AND CONSUMABLES Copyright © 2018 Accenture. All rights reserved. INTEGRATED DIGITAL SYSTEMS 7 AREA 3 Facilitate supply chains driven by end-to-end pull systems that help eliminate waste and promote just-in-time order fulfillment. ADVANCED ANALYTICS Help generate more accurate forecasts and improvements across the entire sales-and-operations-planning process, including better scheduling of material supply. “SMART” ORDERING AND SCHEDULING SYSTEMS Full integration with invoicing and payment functions helps stabilize planning by ensuring spare parts and supplies are on hand when needed. AUTOMATED WORK SCHEDULING PROGRAMS Analyze demand expectations and factor in product lead times to predictively generate work orders and optimized logistics routing that proactively helps meet just-in-time customer needs. BLOCKCHAIN Greater process efficiency with improved accuracy and a reduced need for governance; clearer visibility leading to enhanced compliance, improved accuracy and insight-based decision making; secure data exchange and fewer manual processes. ADVANCED MANUFACTURING TECHNIQUES Additive manufacturing and rapid prototyping, along with real-time performance data analytics, are ripe for adoption in this space. These technologies can help optimize products and respond more quickly to customer demands. With increased scrutiny on costs, flexible manufacturing that allows for job-specific optimization, provides a significant competitive advantage to manufacturers. INDUSTRIAL INTERNET OF THINGS (IIoT) AND DIGITAL TWIN SYSTEMS Like those used to improve asset utilization in the field can also be applied to manufacturing equipment, enabling better utilization rates and virtually eliminating unplanned downtime through condition-based preventative maintenance. VIRTUAL TRAINING ENVIRONMENTS AND WEARABLE COMMUNICATIONS TECHNOLOGY Help increase uptime in manufacturing environments by empowering employees to cross-train and develop flexible skillsets.
  8. 8. SHIFTING THE BACK-OFFICE COST STRUCTURE AND MAKING IT MORE FLEXIBLE Copyright © 2018 Accenture. All rights reserved. • The core “towers” of HR, finance, IT and procurement have significant opportunities for cost savings and modernization—especially in the OFES sector given the volatility of activity and revenue where large fixed costs can place companies at risk. • Digital technologies such as robotics process automation (RPA) and zero-based approaches can help companies change their cost structure from fixed to variable, protecting them from market swings and enabling them to respond effectively. • Automation can bring savings by freeing up technical workers to focus on higher value-add activities. 8 AREA 4
  9. 9. ACHIEVING DIGITAL TRANSFORMATION FOR OFES COMPANIES—WHAT IS REQUIRED? Copyright © 2018 Accenture. All rights reserved. 9 VISION OPERATING MODEL TALENT & CULTURE TECHNOLOGY ECOSYSTEM BUSINESS CASE What degree of transformation? How will progress be measured? What level of change is needed? How will change be governed? What’s are the new skills needed? What behaviors do you want to change? What are the capabilities needed? Where would a partner help you accelerate? Where’s the most value? What’s the funding plan?
  10. 10. THRIVING IN THE NEW OIL AND GAS MARKET Copyright © 2018 Accenture. All rights reserved. • Digital technologies can have a disruptive impact on the landscape of how work is done in the oilfield, with the potential to redraw the value chain, deliver a step change in productivity and create new channels to market, but services and machine & equipment manufacturing companies need robust strategies to succeed. • Companies can become enamored with technological advancements, failing to consider how best to apply them toward business goals—at times spending on ventures and business models that do not deliver. • Leaders should understand where and how disruptions will impact them—accurately assessing maturity and gaps in the existing digital culture—and then determining which solutions are appropriate to further the overall digital vision while delivering the highest return on investment. 10
  11. 11. Copyright © 2018 Accenture. All rights reserved. 11 Disclaimer This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative. This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks. Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions – underpinned by the world’s largest delivery network – Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 435,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com. About Accenture Visit us at Accenture.com/energy Connect With Us

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